Electricity VAT cut to 0%: what EV drivers save until March

VAT on household electricity in England, Scotland and Wales fell from 5% to zero on 1 October 2026 and will stay there until 31 March 2027. For an EV driver with a home charger, analysis by New AutoMotive puts the cut at about £27 a year on a standard tariff, but just £13 on a cheap EV tariff. Drivers who rely on public chargers get nothing, because they still pay 20% VAT.

The cut was announced by Prime Minister Andy Burnham in July, and GOV.UK says it saves the average household £45 a year. It arrived alongside a 4% rise in Ofgem’s price cap for a typical dual-fuel home, so what you actually gain depends on your tariff and on where you charge.

What has changed, and who gets it?

The rate on domestic electricity is now 0% for six months. HMRC’s guidance confirms it covers Great Britain only: the 5% reduced rate still applies in Northern Ireland. VAT on gas is unchanged at 5%, so a dual-fuel bill still carries some VAT (OVO Energy has a plain-English explainer).

You do not need to apply. GOV.UK says suppliers are expected to stop charging VAT on electricity from 1 October, including on fixed tariffs where you have already locked in your rate. Octopus EV says Octopus Energy is passing the cut on from day one, fixed tariffs included. Electricity used to charge your car at home is covered like any other.

How much is the cut worth per kWh?

Removing 5% VAT takes 4.76% off any VAT-inclusive price, so the saving shrinks with the rate you pay. That is why the driver on a cheap overnight rate gains least. The table uses the Ofgem cap rate and current Octopus smart rates, with our calculation of each rate with 5% VAT added back. The 72kWh charge is the mid-size battery example used by Electrifying.

Rate	Price now (0% VAT)	Same rate with 5% VAT	VAT saved per kWh	Saving on a 72kWh charge
Ofgem price cap, standard variable (October to December)	26.32p	27.64p	1.32p	95p
Intelligent Octopus Go smart charging	7.7p	8.09p	0.39p	28p
Intelligent Octopus Go EV Saver (Octopus EV drivers)	6.6p	6.93p	0.33p	24p
Public charger	Unchanged	20% VAT still applies	0p	0p

The bigger saving at home still comes from the tariff, not the tax. Moving from the 26.32p cap rate to a 7.7p smart tariff saves 18.62p per kWh, about 14 times what the VAT cut is worth on the standard rate. Our guide to what it costs to charge an EV at home runs through those numbers in more detail.

Did the price cap swallow the saving?

For drivers on a standard variable tariff, largely yes. The cap unit rate was 26.11p per kWh, including 5% VAT, from July to September. From 1 October it is 26.32p with no VAT at all, so the underlying price rose. Electrifying calculates that a 72kWh charge on the cap rate went up from £18.80 to £18.95.

Without the VAT cut, the same rate would have been 27.64p, a rise of almost 6%. The cut turned that into a rise of under 1%. The daily standing charge fell from 57.19p to 54.83p. We break down the new cap in our piece on the October price cap and home charging costs.

The outlook is less kind. Cornwall Insight forecasts that the cap will rise 16% in January to £1,999 a year for a typical dual-fuel household, with electricity at 30.28p per kWh. That is a forecast, not a confirmed figure, but it suggests standard-rate home charging will get dearer this winter even with no VAT on the bill.

Who misses out?

New AutoMotive’s analysis shows how unevenly the benefit falls.

How you charge	Yearly saving from home VAT cut	Yearly VAT still paid on public charging
Home charger on a cheap EV tariff	£13	£42
Home charger on a standard tariff	£27	£62
Extension lead or kerbside cable channel	£21	£113
No home charging	£0	£216

In every group, the VAT paid on public charging is bigger than the saving at home, and the 9% of EV drivers with no home charging save nothing. At a public charger, one pound in every six you pay is VAT. The savings are also yearly figures: the zero rate lasts six months, so the cash you keep by 31 March will be smaller unless the cut is extended.

Trade body ChargeUK says the VAT gap between a driver who can charge at home and one who relies on public chargers has grown to £200 a year. It has coordinated a letter to the Prime Minister, signed by groups including the AA, Autotrader and the FairCharge campaign, on behalf of the estimated 10 million households that cannot charge at home. ChargeUK, which led the letter, puts the cost to the Treasury of aligning the rates at around £180 million a year.

A First-tier Tribunal ruled in February 2026, in a case brought by operator Charge My Street, that public charging should carry 5% VAT. HMRC is appealing that decision, and 20% remains the rate in the meantime. Our report on the public charging VAT gap covers the campaign in depth.

What this means for you

If you charge at home, you are already getting the cut, so check that your bills show 0% VAT on electricity from 1 October. On a standard variable tariff it is worth having, but the January forecast suggests it will soften price rises rather than make charging cheaper. If you are still on the cap rate, switching to a smart EV tariff is worth far more than the VAT change: compare the options in our EV tariffs guide and our Octopus Go versus Intelligent Octopus Go comparison.

If you are already on a cheap overnight tariff, the cut is small change, and nothing about it should alter how you charge. If you rely on public chargers, nothing has changed: 20% VAT still applies until the government acts or HMRC loses its appeal. Drivers without a driveway in England should also watch the cross-pavement charging planning changes, which could make charging at home possible on more streets.

Our view: the cut is welcome but modest for EV drivers, and it is temporary. Unless it is extended, VAT on household electricity returns to 5% on 1 April 2027. The tariff you charge on matters far more than the tax on it.